Ontario Finance Minister Greg Sorbara raised health-care and education spending in his first budget Tuesday, but the increases came at a steep price for his fledgling government's credibility.

The budget hiked taxes and forecast a deficit, breaking two key election promises made by Premier Dalton McGuinty's Liberals in the campaign that brought them to power last fall.

Greg Sorbara
Greg Sorbara

Sorbara defended his decision to break those election pledges.

"They are choices that are inconsistent with our election commitments," he said in his budget address. "We openly acknowledge that."

"However, it would simply not be possible to deliver a balanced budget this year without destabilizing vital public services and perhaps even the economy itself. Such an approach would be irresponsible, and we reject it," he said.

To that end, Sorbara forecast a deficit of $2.2 billion this year, flouting a campaign promise that the Liberals would balance the books in every year of their mandate.

According to his plan, the province will spend more money than it takes in for three years, with the flow of red ink continuing until Ontario's books are finally balanced in the 2007-08 fiscal year.

Health-care premiums return

The budget commits $2.4 billion in new spending on health care, financed in part by the re-introduction of health-care premiums.

Families with taxable income between $20,000 and $36,000 will pay an extra $300 a year to subsidize health-care costs; the levy rises to $900 annually for taxable incomes greater than $200,000.

Ontario's last Liberal government eliminated health-care premiums 15 years ago. At that time, they were replaced with an employer health levy, forcing companies to pay the OHIP premiums.

The re-introduction of premiums paid by individuals puts Ontario with Alberta and British Columbia as the only provinces charging the extra fees.

Sorbara's budget also cut off government payments for chiropractors, limited them for vision tests and physiotherapy, and raised fees for drivers' licences.

Higher 'sin' taxes coming

The budget explicitly shattered another central plank of the McGuinty election platform, raising taxes on cigarettes and alcohol.

The cost of a carton of 200 cigarettes will go up by $2.50 each, effective May 19.

Starting June 21, the price for a 750 ml bottle of wine goes up 15 cents, while the cost of 24 bottles of beer will rise by 45 cents.

Classroom size capped up to Grade 3

The Liberals will keep a costly promise to cap class sizes at 20 students in the years up to Grade 3.

Combined with other commitments, including training 1,000 more teachers, the total bill for new education spending will hit $2.1 billion annually by the time the Liberals plan to balance the budget in 2007-08.